Canada recorded its first trade deficit in more than 30 years in December, with fewer Canadian exports leaving our borders than imports coming in.
The latest trade numbers were released from Statistics Canada on Wednesday, showing the trade deficit amounting to $458 million.
It's the first time Canada has posted a trade deficit since March 1976.
Prime Minister Stephen Harper said during question period Wednesday that trade numbers were "due to a weakness in world markets and a sudden drop in value of Canadian exports," particularly falling crude oil prices.
"At the same time, we do expect the change in the value of the Canadian dollar to help that situation," Harper said.
Harper said that economic stimulus packages being passed or prepared in most G20 countries should strengthen world trade markets.
Finance Minister Jim Flaherty made similar comments Wednesday morning, saying Canada should export more goods to the U.S. now that the Canadian dollar has slipped away from parity with the U.S. Greenback.
Peter Hall, deputy chief economist with Export Development Canada, said Harper and Flaherty's assessment, that the trade deficit can be returned to normal by the falling Canadian dollar, was too rosy.
"I don't think (the lower dollar) is enough to shore up demand around the rest of the world, and that's one of the key problems right now," he told CTV's Power Play with Tom Clark Wednesday.
But he added, "the depreciation of the dollar has been dramatic over the last while and that will lend tremendous support to the bottom lines of firms that are really struggling."
International Trade Minister Stockwell Day said the trade imbalance is directly linked to the struggling U.S. economy. He said Canada's largest trading partner is going through "very difficult times," and as a result, isn't buying as much as in the past -- especially Canadian energy exports.
"Principally, the drop is related to oil and gas revenues," Day said. "If another country like the U.S. isn't producing as much, then they're not burning as much oil and gas, and therefore that's a significant part of the drop in the exports."
In November of last year, Canada posted a trade surplus of $1.2 billion -- illustrating the dramatic impact the global recession has had on the economy of Canada and its trading partners.
Overall, according to StatsCan, exports were down 9.7 per cent to $35 billion in December -- the sharpest month-to-month drop since October 1982, reflecting drops in both prices and volume.
Exports to the U.S. only were down 10 per cent to $25.9 billion, led by falling crude oil exports. Exports to countries other than the U.S. were down by 9 per cent, a slightly slower pace.
Imports to Canada were also down in December, though not as dramatically, falling 5.7 per cent to $35.8 billion.
The change in import trade was largely due to reductions in volume of imported machinery and equipment, automotive products and industrial goods and materials.
Following are some additional key details from the report:
- Energy exports dropped 19.4 per cent to $6.8 billion.
- Industrial goods and materials exports fell 17.1 per cent to $7.4 billion.
- Fertilizer exports dropped 36.8 per cent, erasing two consecutive months of increases.
- Aluminum exports fell 26.7 per cent largely due to reduced demand from the auto industry.
- Agricultural and fishing products exports dropped 7 per cent to $3.4 billion in December.
